Massive victory gives mandate for privatisation plans

The huge majority granted to the Thai government in recent elections has all but assured the completion of the planned privatisation of the Electricity Generating Authority of Thailand (Egat).

Newly returned Prime Minister Thaksin Shinawatra said privatisation of state enterprises would be the top priority in his second term, although the government is expected to retain a controlling interest in state enterprises and to sell stakes through the stock exchange rather than to strategic investors. The government is keen to list at least part of Egat to boost the market capitalisation of the Thai Stock Exchange. Furthermore, the privatisation will enable Egat to reduce its debt, which is currently about 48% of the country’s public debt, and the proceeds could also help finance populist investment policies.

The Egat management has already prepared proposals for changes in its financial structure and its governor, Kraisri Karnasutra, has said that 18 options are on the cards for Egat, including listing on the Stock Exchange of Thailand, using power sale agreements as collateral in obtaining loans, and the development of new power plants for trading on the stock market.

The option most favoured by employees will be presented to the cabinet for approval.

A 30% stake in Egat was due to have been sold last year, but significant union opposition saw the plans suspended, a position that has changed little in the intervening year. Unions still oppose privatisation of Egat, largely because generation seen as a national asset. In an attempt to head off controversy, Thaksin may offer new consultation processes, specific guarantees on tariffs or detailed plans for a government regulatory agency and other mechanisms to check what are seen as the excesses of the private sector. Egat currently operates two-thirds of Thailand’s total installed capacity and operates the national transmission network. Electricity prices are expected to fall in the face of competition.